Liberal Economics 2: Public Choice Theory

Abstract

An important element of New Right economics is public choice theory (also known as the ‘Virginia School’, or rational choice theory, or the economics of politics; see Dunleavy, 1986), which has been especially influential amongst New Right intellectuals. However, the term ‘public choice’ or the ‘economics of politics’ has not gained the wide usage of other New Right terms like monetarism and privatisation. This reflects the complexity of rational choice analysis. But there is significant overlap between public choice theory and other aspects of liberalism. Also, the influential New Right Institute of Economic Affairs has devoted part of its publications to propagating public choice arguments in a highly readable form. This has increased their accessibility for liberal politicians. This chapter begins with a discussion of the meaning of public choice analysis and then considers specific contributions. These include rational choice arguments about the behaviour of voters, politicians and bureaucrats in liberal democracies, and issues such as the prisoners’ dilemma and the problem of collective action. Technical explanation is eschewed in favour of qualitative exposition of the core assumptions. The chapter does not provide a comprehensive account of public choice theory (for reviews see Laver, 1981; Mueller, 1979; Barry and Hardin, 1983; Bonner, 1986). Rather this chapter illustrates the nature of public choice analysis and identifies the contributions most influential amongst New Right advocates.